“Profits recessions are usually associated with recessions for
the economy as a whole, so the data are certainly
attention-grabbing,” High Frequency Economics’ Jim O’Sullivan
writes. “There have been exceptions, however—most notably the
1998 period we have been highlighting as fairly analogous to the
current time."

"Back then, global growth and exports weakened significantly, oil
and other commodity prices fell sharply and the dollar surged,
yet overall U.S. growth remained solid," he added. "Strength in
domestic demand offset weakness in foreign demand, as we
illustrate in the chart..."

"In effect, the drop in oil prices represents a transfer of
income from the business sector—domestic and foreign—to the
consumer sector," he said.

Even the strong dollar comes with some offsetting positive
effects.

For O'Sullivan, we're reliving a 1998-style profits recession
that came and went without the economic recession.

"We expect that pattern to be repeated this time; it has been
thus far," he said. "Of course, overall growth is lower now than
it was back then, but the potential growth rate is lower as well.
We expect the unemployment rate to keep falling."